Perhaps the most frequently asked questions I get by business owners are “Should I form a Limited Liability Company (LLC)? What are the advantages if I did? Should I wait until my business grows to a certain level?”
You may have started your small business under your own individual name and filed a Fictitious Name Registration for your business name with the Missouri Secretary of State’s Office (also known as a DBA). This has not technically formed a separate business entity.
The biggest drawback to operating as a DBA is that there is no distinction between you and your business.
Simply put, if you are sued in the course of your operations, you stand to lose your personal as well as your business assets.
LLCs are similar to corporations in that they offer certain liability protections to the owners. However, LLCs have fewer corporate formalities and greater tax flexibility.
This is one of the key reasons that I advise clients to consider forming an LLC at the initial stages of starting their new business. You shouldn’t wait until you are a certain size, have a certain amount of revenue, or begin hiring employees. Don’t think you are too small to take this important step.
The most popular feature of the LLC is your personal protection from your business liabilities. With an LLC in place, a lawsuit against your business may still be able to clean out your business assets but likely won’t cost you your family home.
LLCs can be formed with more than one owner and have the operational flexibility of a partnership. If this option is chosen, I can’t stress enough the importance of consulting an attorney to draw up an operating agreement. Few people go into business expecting things to go awry, however, it is good business practice to have strong legal agreements in place between business owners from the beginning.
At the 417 Business & Elder Law, we can help you understand the advantages of forming an LLC and discuss the options available to best fit your needs.
This article was also published in the printed version of the Volume 1 Fall 2015 Newsletter (PDF).
Please call our office at (417) 887-4170 if you have any questions about this article or would like to receive our mailed newsletter.